My colleagues in the Department of Agricultural Economics at Purdue tell me that this is a good time to be a farmer. Corn and bean prices are high, incomes are up and land values are rising.

But into every life a little rain must fall, and every silver lining has a cloud. The very factors that are raising farm income will eventually increase farm property taxes.

Farmland prices are rising, but that’s not the reason property taxes will rise, at least not directly. Farmland is the one major type of property that is not assessed for tax purposes based on predicted selling prices, also known as market value.

Instead, farmland is assessed by formula. It starts with a base rate, a dollar value per acre set by the Department of Local Government Finance.

This base rate is multiplied by a productivity factor. Soils that are better for growing corn have higher factors. The productivity factor varies from about 0.5 to 1.3. Then, for some land, an influence factor is subtracted. This is a percentage reduction to account for things like frequent flooding or forest cover.

The result is the assessed value of an acre of farmland, which is then multiplied by the local property-tax rate to determine the tax bill.

The base rate is calculated using a capitalization formula, which takes the net income earned from an acre of farmland and divides it by a rate of return. This gives the amount a rational buyer would pay to acquire that net income, at that rate of return.

The net income calculation is based half on the rent earned on an average Indiana acre and half on an estimate of operating income – based on corn and bean prices and yields – and on costs.

The rate of return is based on an average of real estate and operating-loan interest rates. Since rents and prices are going up and interest rates have come down, the base rate is increasing.

Price, yield, cost and interest-rate data from the six years of 2002 to 2007 were used to figure the base rate for taxes in 2011. The calculation for 2012 used data from 2003 through 2008. So, the base rate will change for taxes in 2012 because data from 2002 were dropped from the calculation, and data from 2008 were added.

Rents, prices and yields were higher in 2008 than in 2002, so the base rate went up.

The base rate was $1,250 for 2010 taxes, and it will be $1,290 for 2011 taxes. The Department of Local Government Finance has just announced that the base rate for 2012 taxes will be $1,500. That’s a 16-percent increase over 2011.

We know the data for 2009, and we have a good idea of the data for 2010. That means we can project the base rates for 2013 and 2014 with confidence. If the formula stays the same, for 2013 taxes the base rate will rise 10 percent to $1,650, and in 2014 it will rise 7 percent more, to $1,770. All together, from 2010 to 2014, that’s a 42 percent increase.

But wait. Didn’t the General Assembly reform the base-rate calculation last year? It did. Now we drop the highest year of the six, and average the remaining five. Without this reform, the base rate by 2014 would have been $1,960, not $1,770. It’s 42 percent higher than it was - but 10 percent lower than it would have been.

But wait. Didn’t we just vote to put property-tax caps into the state constitution? We did. But the caps limit tax bills to a fixed percentage of assessed value. If assessed value goes up, so do the caps. The rise in the base rate increases assessed values.

One suspects that farmers won’t get much sympathy from other folks in Indiana. The rising tax bills result from the same factors that are raising farm incomes and property values. And, in rural communities, if farmers pay more, homeowners pay less. Homeowners are the majority in every Indiana county.

When times are good, perhaps the best advice for farmers is to hold some back for taxes. Taxes will go up – four years later.